MGMT310NotesChpt03

MGMT310NotesChpt03 - Standardized Financial Statements...

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Unformatted text preview: Standardized Financial Statements Ratio Analysis The DuPont Identity Using Financial Statement Information We already: Know how to build financial statements Today we will learn how to: Standardize financial statements for comparison purposes Compute and interpret important financial ratios Ultimate goal Use these techniques to make sound decisions MGMT 310: Spring 2011 Dr. Amanda Thompson 1 Again, why evaluate financial statements? Internal uses Performance evaluation compensation and comparison between divisions Planning for the future guide in estimating future cash flows Analyzing competitors or acquisition targets External uses Creditors Suppliers Customers Stockholders Purpose of Standardized Statements Allows _______________________ of financial information Over time, particularly as the company ___________________ Across companies of different sizes, particularly within industries Common Size Balance Sheets Compute all accounts as a percent of ___________________ Ex. Accounts Receivable/Total Assets = 8% Common Size Income Statements Compute all line items as a percent of _______________ Ex. COGS/Sales = 45% Standardized Financial Stmts MGMT 310: Spring 2011 Dr. Amanda Thompson 2 Industry Example Toyota Balance Sheet and Income Statements Purpose of Ratio Analysis Assess firm health Allow better comparison through time or between firms Ratios are more than just formulas Think about what the ratio is trying to measure Figure out why that information is important Figuring out what the units are helps intuition Ratio Analysis MGMT 310: Spring 2011 Dr. Amanda Thompson 3 Evaluating ratios...
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MGMT310NotesChpt03 - Standardized Financial Statements...

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